US Inflation Cools

The latest inflation print unravelled a compelling sign that inflationary pressures are continuing to ease, with many now expecting a downshift in monetary tightening from the Fed. This was as core inflation came in lower than expected at 6% year-on-year, marking a 0.2% rise in November, the smallest monthly advance since August 2021. Headline inflation which includes food and energy also undershot expectations coming in at 7.1%. Markets reacted positively after the report was released with the NASDAQ and S&P 500 closing higher at 1.01% and 0.73% respectively, whilst US Treasuries also rallied. The boost in confidence was underscored by the expectation that rate hikes can now be eased to 0.5%, with the understanding that 0.75% rate hikes are now in rear view. Though the outlook appears more optimistic, Jereme Powell will continue to communicate that rates will remain restrictive into next year to help bring inflation back to target.